[Federal Register Volume 80, Number 176 (Friday, September 11, 2015)]
[Notices]
[Pages 54769-54773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22892]
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CONSUMER PRODUCT SAFETY COMMISSION
[CPSC Docket No. 15-C0007]
phil&teds USA, Inc., Provisional Acceptance of a Settlement
Agreement and Order
AGENCY: Consumer Product Safety Commission.
ACTION: Notice.
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SUMMARY: It is the policy of the Commission to publish settlements
which it provisionally accepts under the Consumer Product Safety Act in
the Federal Register in accordance with the terms of 16 CFR 1118.20(e).
Published below is a provisionally-accepted Settlement Agreement with
phil&teds USA, Inc., containing a civil penalty of $3,500,000, with
$3,300,000 of the total suspended, subject to the terms and conditions
of the Settlement Agreement. phil&teds USA, Inc., shall pay the non-
suspended portion of the penalty, $200,000, in accordance with the
terms set forth in the Settlement Agreement.\1\ The $200,000 Payment
shall be paid within thirty (30) calendar days after the phil&teds USA,
Inc., receives service of the Commission's final Order accepting the
Agreement.
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\1\ The Commission voted (4-1) to provisionally accept the
Settlement Agreement and Order regarding phil&teds USA, Inc.
Chairman Kaye, Commissioner Adler, Commissioner Robinson and
Commissioner Buerkle voted to provisionally accept the Settlement
Agreement and Order. Commissioner Mohorovic voted to take other
action and reject the Settlement Agreement and Order and return to
staff to seek higher payment.
DATES: Any interested person may ask the Commission not to accept this
agreement or otherwise comment on its contents by filing a written
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request with the Office of the Secretary by September 28, 2015.
ADDRESSES: Persons wishing to comment on this Settlement Agreement
should send written comments to the Comment 15-C0007 Office of the
Secretary, Consumer Product Safety Commission, 4330 East-West Highway,
Room 820, Bethesda, Maryland 20814-4408.
FOR FURTHER INFORMATION CONTACT: Leah Wade, Trial Attorney, Office of
the General Counsel, Division of Compliance, Consumer Product Safety
Commission, 4330 East-West Highway, Bethesda, Maryland 20814-4408;
telephone (301) 504-7225.
SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears
below.
Dated: September 8, 2015.
Todd A. Stevenson,
Secretary.
UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION
In the Matter of: phil&teds USA, Inc.
CPSC Docket No.: 15-C0007
SETTLEMENT AGREEMENT
1. In accordance with the Consumer Product Safety Act (``CPSA''),
15 U.S.C. 2051-2089 and 16 CFR 1118.20, phil&teds USA, Inc.
(``phil&teds USA'' or ``Firm''), and the U.S. Consumer Product Safety
Commission (``Commission''), through its staff (``Staff''), hereby
enter into this Settlement Agreement. The Settlement Agreement and
Affidavit of Corporate Officer, attached at Exhibit A (collectively the
``Agreement'') and the incorporated attached Order (``Order'') resolve
Staff's charges set forth below.
THE PARTIES
2. The Commission is an independent federal regulatory agency
established pursuant to, and responsible for, the enforcement of the
CPSA. By executing this Agreement, Staff is acting on behalf of the
Commission, pursuant to 16 CFR Sec. 1118.20(b). The Commission issues
the Order under the provisions of the CPSA.
[[Page 54770]]
3. phil&teds USA is a corporation, organized and existing under the
laws of the state of Colorado, with its principal corporate office
located in Fort Collins, CO. phil&teds USA is an importer, distributor
and retailer of children's strollers, child carriers and other baby
products and accessories.
STAFF'S CHARGES
4. From May 2009 through January 2011, phil&teds USA imported and
sold in the United States, approximately 13,500 clip-on high chairs
under the brand name, MeToo Chairs (``Chairs''). The Firm sold the
Chairs online and through independent retailers nationwide.
5. The Chairs are ``consumer products,'' and, at all relevant
times, phil&teds USA was either the importer, ``distributor'' or
``retailer'' of these consumer products, which were ``distributed in
commerce,'' as those terms are defined or used in sections 3(a)(5),
(7), (8),and (13) of the CPSA, 15 U.S.C. 2052(a)(5), (7), (8), and
(13).
6. The Chairs are defective and create an unreasonable risk of
serious injury because the clamps on the Chairs can detach from the
table, posing a fall hazard. If only one side of the Chair detaches,
the lack of space between the metal cross bar and the clamps creates a
finger pinching, laceration, and amputation hazard.
7. Between September 2009 and October 2010, the Firm obtained
sufficient information that reasonably supported the conclusion that
the Chairs contained a defect that could create a substantial product
hazard or created an unreasonable risk of serious injury. Specifically,
the Firm was aware of reports of incidents and injuries, including
reports of fingertip amputations to children. The Firm was also aware
that two design changes had been implemented to address the defects in
the Chair.
8. Despite having information regarding the Chair's defect or risk,
the Firm failed to inform the Commission immediately, as required by
sections 15(b)(3) and (4) of the CPSA, 15 U.S.C. Sec. Sec. 2064(b)(3)
and (4).
9. Because the information in the Firm's possession constituted
actual and presumed knowledge, the Firm knowingly violated section
19(a)(4) of the CPSA, 15 U.S.C. Sec. 2068(a)(4), as the term
``knowingly'' is defined in section 20(d) of the CPSA, 15 U.S.C. Sec.
2069(d).
10. When the Firm filed its Full Report, the Firm:
a. underreported the total number of incidents and injuries
involving the Chairs, stating that it was aware of 10 ``instances''
involving the product, but provided no details on the instances and
failed to indicate that the Firm was aware of two amputation injuries;
b. failed to notify staff that the Chairs posed an amputation
hazard; and
c. withheld information that the Chair had been redesigned to
address the hazard and that the sample product supplied with the Full
Report was manufactured differently than the Chairs involved in the
incident and injury reports.
11. The Firm's failure to report this information resulted in
delayed implementation of the corrective action and recall of the
product, which was not publicly announced until August 17, 2011.
12. By making these inaccurate and incomplete statements in the
Full Report, the Firm knowingly committed a material misrepresentation
to an officer or employee in the course of an investigation under the
CPSA, which violates section 19(a)(13) of the CPSA, 15 U.S.C. Sec.
2068(a)(13), as the term ``knowingly'' is defined in section 20(d) of
the CPSA, 15 U.S.C. Sec. 2069(d).
13. Under section 20 of the CPSA, 15 U.S.C. Sec. 2069, the Firm is
subject to civil penalties for its knowing violation of section
19(a)(4) of the CPSA, 15 U.S.C. Sec. 2068(a)(4) and for the Firm's
knowing material misrepresentations in violation of section 19(a)(13)
of the CPSA, 15 U.S.C. Sec. 2068(a)(13).
FIRM'S RESPONSE
14. This Agreement does not constitute an admission by the Firm to
the charges set forth in paragraphs 4 through 13, including charges
that phil&teds USA violated any statute or regulation, failed to timely
report, or committed a material misrepresentation in violation of the
CPSA. In fact, phil&teds USA took the initiative in reporting incidents
surrounding the Chair to the CPSC, disclosed the number of those
incidents, and further explained that unreasonable misuse of the
product was the cause of serious injuries.
AGREEMENT OF THE PARTIES
15. Under the CPSA, the Commission has jurisdiction over the matter
involving the Chairs and over phil&teds USA, Inc.
16. In settlement of Staff's charges, and to avoid the cost,
distraction, delay, uncertainty, and inconvenience of protracted
litigation or other proceedings, the Firm shall pay a civil penalty in
the amount of three million, five hundred thousand dollars ($3,500,000)
(``Total Civil Penalty Amount''). In reliance on the accuracy and
completeness of the Firm's representations and warranties in this
Agreement, the Commission agrees to suspend all but two hundred
thousand dollars ($200,000) of the Total Civil Penalty Amount
(``$200,000 Payment''), on the terms and conditions set forth in this
Agreement. The $200,000 Payment shall be paid within thirty (30)
calendar days after the Firm receives service of the Commission's final
Order accepting the Agreement. All payments to be made under the
Agreement shall constitute debts owing to the United States and shall
be made by electronic wire transfer to the United States via: http://www.pay.gov for allocation to and credit against the payment
obligations of the Firm under this Agreement.
17. phil&teds USA represents and warrants that the financial
statements of phil&teds USA provided to the Commission in connection
with the matters addressed in this Agreement (``Financial Statements'')
are complete, accurate and current and have been prepared on a
consistent basis throughout the periods indicated except as otherwise
noted therein, and that the Financial Statements fairly present the
financial condition and results of operations and cash flow of the Firm
as of the dates, and for the periods, indicated therein, all
consistently applied during the periods involved except as noted
therein, and subject, in the case of the unaudited interim financial
statements, to the absence of notes and normal year-end adjustments.
18. The Firm represents and warrants that the information supplied
by the Firm to the Commission in connection with the matters addressed
in the Agreement (including information about the Firm's financial
resources and ability to pay the Total Civil Penalty Amount) did not,
at the time provided to the Commission, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
19. The parties agree that an amount equal to Total Civil Penalty
Amount minus any amounts paid by phil&teds USA pursuant to this
Agreement shall become due and payable immediately upon the occurrence
of an ``Event of Default,'' without notice or further action by any
party. An ``Event of Default'' means:
a. a failure of phil&teds USA to pay the $200,000 Payment (or any
portion thereof) when due and payable;
b. the breach or inaccuracy of any representation or warranty of
phil&teds USA in this Agreement;
[[Page 54771]]
c. the breach or failure by phil&teds USA to observe or perform any
of its obligations, covenants or agreements set forth in the Agreement;
or
d. a failure of phil&teds USA to comply with all CPSC statutes or
regulations for three (3) years after the effective date of this
Agreement.
20. All unpaid amounts, if any, due and owing under the Agreement
shall constitute a debt due and immediately owing by phil&teds USA to
the United States, and interest shall accrue and be paid by phil&teds
USA at the federal legal rate of interest set forth at 28 U.S.C. Sec.
1961(a) and (b) from the date of Event of Default until all amounts due
have been paid in full (hereinafter ``Default Payment Amount'' and
``Default Interest Balance''). phil&teds USA shall consent to a Consent
Judgment in the amount of the Default Payment Amount and Default
Interest Balance, and the United States, at its sole option, may
collect the entire Default Payment Amount and Default Interest Balance
or exercise any other rights granted by law or in equity, including but
not limited to referring such matters for private collection, and
phil&teds USA agrees not to contest, and hereby waives and discharges
any defenses to, any collection action undertaken by the United States
or its agents or contractors pursuant to this paragraph. phil&teds USA
shall pay the United States all reasonable costs of collection and
enforcement under this paragraph, respectively, including reasonable
attorney's fees and expenses.
21. phil&teds USA shall notify CPSC in writing if any financial
information supplied or to be supplied in writing by phil&teds USA to
the Commission in connection with the Agreement is, in any material
respect, discovered not to be true, accurate or complete; is no longer
true, accurate or complete as a result of subsequent events; is
discovered to contain an untrue statement of a material fact or to omit
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; or contains as a result of subsequent
events an untrue statement of a material fact or an omission of a
material fact required to be stated, not misleading.
22. After Staff receives this Agreement executed on behalf of
phil&teds USA, Staff shall promptly submit the Agreement to the
Commission for provisional acceptance. Promptly following the
Commission's provisional acceptance of the Agreement, the Agreement
shall be placed on the public record and published in the Federal
Register, in accordance with the procedures set forth in 16 CFR Sec.
1118.20(e). If within fifteen (15) calendar days the Commission does
not receive any written request not to accept the Agreement, the
Agreement shall be deemed finally accepted on the sixteenth (16th)
calendar day after the date the Agreement is published in the Federal
Register, in accordance with 16 CFR Sec. 1118.20(f).
23. This Agreement is conditioned upon, and subject to, the
Commission's final acceptance, as set forth above, and is subject to
the provisions of 16 CFR Sec. 1118.20(h). Upon the later of: (i) The
Commission's final acceptance of this Agreement and service of the
accepted Agreement upon phil&teds USA, and (ii) the date of issuance of
the final Order, this Agreement shall be in full force and effect, and
shall be binding upon the parties.
24. Effective upon the later of: (i) The Commission's final
acceptance of the Agreement and service of the accepted Agreement upon
phil&teds USA, and (ii) the date of issuance of the final Order, for
good and valuable consideration, phil&teds USA hereby expressly and
irrevocably waives and agrees not to assert any past, present, or
future rights to the following, in connection with the matter described
in the Agreement: (a) An administrative or judicial hearing; (b)
judicial review or other challenge or contest of the validity of the
Order or of the Commission's actions; (c) a determination by the
Commission of whether phil&teds USA failed to comply with the CPSA and
the underlying regulations; (d) a statement of findings of fact and
conclusions of law; and (e) any claims under the Equal Access to
Justice Act.
25. phil&teds USA shall implement and maintain a compliance program
designed to ensure compliance with the statutes and regulations
enforced by the Commission that, at a minimum, contains the following
elements:
a. written standards and policies concerning products sold by
phil&teds USA in the United States that may relate to, or impact, CPSA
compliance;
b. procedures for verifying the accuracy and completeness of
information conveyed to the Commission;
c. procedures for implementing corrective and preventive actions
when compliance deficiencies or violations are identified;
d. procedures for collecting information from phil&teds USA's
affiliates on incidents and injuries occurring outside the United
States;
e. a mechanism for confidential employee reporting of compliance-
related questions or concerns to either a compliance officer or to
another senior manager with authority to act as necessary;
f. effective communication of company compliance-related policies
and procedures to all employees through training programs or otherwise;
g. senior manager responsibility for compliance and accountability
for violations of the statutes and regulations enforced by the
Commission;
h. board oversight of compliance; and
i. retention of all compliance-related records for at least five
(5) years and availability of such records to Staff, upon request.
26. phil&teds USA shall implement, maintain and enforce a system of
internal controls and procedures designed to ensure that:
a. information required to be disclosed by phil&teds USA to the
Commission is recorded, processed and reported in accordance with
applicable law;
b. all reporting made to the Commission is timely, truthful,
complete and accurate; and
c. prompt disclosure is made to phil&teds USA's management of any
significant deficiencies or material weaknesses in the design or
operation of such internal controls that are reasonably likely to
adversely affect in any material respect phil&teds USA's ability to
record, process, and report to the Commission in accordance with
applicable law.
27. Upon Staff's request, phil&teds USA shall provide written
documentation of its compliance program and system of internal controls
and procedures, including, but not limited to, the effective dates of
the program, controls and procedures and improvements thereto.
phil&teds USA shall cooperate fully and truthfully with Staff and shall
make available all information, materials, and personnel deemed
necessary by Staff to evaluate phil&teds USA's compliance with the
terms of the Agreement.
28. phil&teds USA agrees that any settlement agreements with
consumers involving products over which the Commission has
jurisdiction, and which include a confidentiality clause, must include
an exception to the confidentiality clause that allows consumers to
discuss any issues related to their settlement agreement with officers
and employees of the Commission and other local, state and federal
government representatives.
29. The parties acknowledge and agree that the Commission may make
public disclosure of the terms of the Agreement and Order.
[[Page 54772]]
30. phil&teds USA represents that the Agreement: (i) Is entered
into freely and voluntarily, without any degree of duress or compulsion
whatsoever; (ii) has been duly authorized; and (iii) constitutes the
valid and binding obligation of phil&teds USA, and each of its
successors, transferees, and/or assigns.
31. The signatories represent that they are authorized to execute
this Agreement.
32. The Agreement is governed by the laws of the United States.
33. The Agreement and the Order shall apply to, and be binding
upon, phil&teds USA and each of its successors, transferees, and/or
assigns, and a violation of the Agreement or Order may subject
phil&teds USA and each of its successors, transferees, and/or assigns
to appropriate legal action.
34. The Agreement and the Order constitute the complete agreement
between the parties on the subject matter.
35. The Agreement may be used in interpreting the Order.
Understandings, agreements, representations, or interpretations apart
from those contained in the Agreement and the Order may not be used to
vary or contradict their terms. For purposes of construction, the
Agreement shall be deemed to have been drafted by both of the parties,
and therefore, shall not be construed against any party for that reason
in any subsequent dispute.
36. The Agreement shall not be waived, amended, modified, or
otherwise altered, except as in accordance with the provisions of 16
CFR 1118.20(h). The Agreement may be executed in counterparts.
37. If any provision of the Agreement or the Order is held to be
illegal, invalid, or unenforceable under present or future laws
effective during the terms of the Agreement and the Order, such
provision shall be fully severable. The balance of the Agreement and
the Order shall remain in full force and effect, unless the Commission
and phil&teds USA agree that severing the provision materially affects
the purpose of the Agreement and Order.
PHIL&TEDS USA, INC.
Dated:-----------------------------------------------------------------
8/12/15
By:--------------------------------------------------------------------
Michael Grant, President,
phil&teds USA, Inc.,
221 Jefferson Street, Suite 100
Fort Collins, Colorado 80524
Dated:-----------------------------------------------------------------
8/13/15
By:--------------------------------------------------------------------
Jonathan Judge,
Schiff Hardin LLP,
233 Wacker Drive, Suite 6600
Chicago, Illinois 60606
Counsel for phil&teds USA, Inc.
U.S. CONSUMER PRODUCT SAFETY COMMISSION STAFF
Dated:-----------------------------------------------------------------
8/13/15
By:--------------------------------------------------------------------
Stephanie Tsacoumis,
General Counsel
Mary T. Boyle,
Deputy General Counsel
Mary B. Murphy,
Assistant General Counsel
Leah Wade,
Trial Attorney
EXHIBIT A
AFFIDAVIT OF CORPORATE OFFICER MICHAEL GRANT
I, the undersigned, swear and affirm that I am employed by
phil&teds USA, Inc., that I hold the position indicated below, and, by
reason of my position, I am authorized and qualified to make the
following statements. All capitalized terms not defined in this
affidavit shall have the meanings given to them in the Agreement
between phil&teds USA, Inc. and the U.S. Consumer Product Safety
Commission, of which this Affidavit is a part.
1. The financial statements of phil&teds USA provided to the
Commission in connection with the matters addressed in this Agreement
(``Financial Statements'') are complete, accurate and current and have
been prepared on a consistent basis throughout the periods indicated
except as otherwise noted therein, and that the Financial Statements
fairly present the financial condition and results of operations and
cash flow of phil&teds USA as of the dates, and for the periods,
indicated therein, all consistently applied during the periods involved
except as noted therein, and subject, in the case of the unaudited
interim financial statements, to the absence of notes and normal year-
end adjustments.
2. phil&teds USA has supplied all documents and information
responsive to CPSC's requests.
3. The information supplied by phil&teds USA to the Commission in
connection with the matters addressed in the Agreement (including
information about the Firm's financial resources and ability to pay the
Total Civil Penalty Amount) did not, at the time provided to the
Commission, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
4. For each of the fiscal years ended March 31, 2015, 2014 and
2013, the net income, the net worth/stockholder's equity and working
capital of phil&teds USA, Inc., was negative and to satisfy
liabilities, phil&teds USA, Inc. relied on payments from its parent
entity, Most Excellent World Holdings, Limited (``MEW''), pursuant to
an intercompany agreement.
5. phil&teds USA, Inc. has insufficient cash or other liquid assets
to satisfy a civil penalty payment in excess of $200,000, has no
sources of funding that could be used to provide the liquidity to make
such a payment, and is unable to secure funds from MEW to fulfill a
civil penalty payment obligation.
6. phil&teds USA, Inc. will not directly or indirectly receive
reimbursement, indemnification, insurance-related payment or other
payment in connection with the matters addressed in the Agreement.
7. Any civil penalty payment by phil&teds USA, Inc. in excess of
$200,000 will require phil&teds USA, Inc. to cease operations as an
ongoing business.
I declare under penalty of perjury that the foregoing is true and
correct. I understand that any intentional false statement in this
declaration may be a criminal offense under 18 U.S.C. Sec. 1001.
Executed on August 12, 2015
Signed:----------------------------------------------------------------
Michael Grant
President, phil&teds USA, Inc.
UNITED STATES OF AMERICA
CONSUMER PRODUCT SAFETY COMMISSION
In the Matter of: phil&teds USA, Inc.
CPSC Docket No.: 15-C0007
ORDER
Upon consideration of the Settlement Agreement entered into between
phil&teds USA, Inc. (``phil&teds USA''), and the U.S. Consumer Product
Safety Commission (``Commission''), and the Commission having
jurisdiction over the subject matter and over phil&teds USA, and it
appearing that the Settlement Agreement and the Order are in the public
interest, it is
ORDERED that the Settlement Agreement be, and is, hereby, accepted;
and it is
FURTHER ORDERED, that phil&teds USA shall comply with the terms of
the Settlement Agreement and shall pay a civil penalty of $3,500,000,
with $3,300,000 of the total suspended, subject to the terms and
conditions of the Settlement Agreement. phil&teds USA shall pay the
non-suspended portion of the penalty, $200,000, in
[[Page 54773]]
accordance with the terms set forth in the Settlement Agreement. Upon
the occurrence of an Event of Default, as set forth in the Settlement
Agreement, an amount equal to $3,500,000 (representing the entire civil
penalty, including the suspended portion), plus any accrued and unpaid
interest, minus any penalty amounts paid by phil&teds USA, shall
immediately become due and payable.
Provisionally accepted and provisional Order issued on the 8th day
of September , 2015.
BY ORDER OF THE COMMISSION:
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Todd A. Stevenson,
Secretary U.S. Consumer Product Safety Commission
[FR Doc. 2015-22892 Filed 9-10-15; 8:45 am]
BILLING CODE 6355-01-P